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Defense contractor insurance is a bundle of specialty commercial policies designed for businesses that manufacture, supply, or service products and personnel under U.S. government and military contracts. Standard business insurance wasn't built for the liability profile that comes with this work. If a component you manufactured contributes to an equipment failure, or a data breach exposes sensitive government information, the legal and financial consequences can move fast and go deep. Bittick works with carriers that understand government contracting, and we place the right combination of policies so your coverage actually matches your contract obligations and operational footprint.

What this coverage includes

Errors and Omissions Liability

Errors and omissions (E&O) insurance covers claims that a product or service you delivered failed to perform as specified, or that you didn't fulfill a contract obligation. For defense contractors, that exposure can be severe. If a part you manufactured is alleged to have malfunctioned in a mission-critical application, E&O coverage steps in to pay defense costs and covered damages so a single claim doesn't sink the company. This is typically a foundational piece of a defense contractor insurance program.

Cyber Liability

Defense contractors working with military and intelligence agencies are priority targets for cyberattacks, including state-sponsored intrusions. Cyber liability insurance covers the costs of a breach: forensic investigation, notification requirements, regulatory defense, and claims from clients or government partners whose data was exposed. It can also cover business interruption losses if an attack takes your systems offline. This coverage matters whether you handle classified data or simply operate on government networks.

Defense Base Act Coverage

If your company employs workers on U.S. government contracts outside the United States, federal law requires you to carry Defense Base Act (DBA) insurance. DBA is a federally mandated form of workers' compensation that covers medical costs and wage replacement for employees injured or killed while working abroad on a government contract. Skipping it isn't just a contract violation: it can result in fines, criminal penalties, and debarment. Bittick works with carriers who specialize in writing DBA for contractors across multiple countries and contract types.

Kidnap, Ransom, and Extortion Insurance

Personnel working in high-risk regions under government contracts can become targets for kidnapping or extortion. Kidnap, ransom, and extortion (KRE) insurance covers the direct costs of a ransom demand, associated negotiation expenses, and crisis management services. Some policies also include pre-incident risk consulting to help your organization develop protocols before a situation occurs. If your employees or their family members travel to or are stationed in elevated-risk locations, this coverage deserves a serious look.

Inland Marine and Ocean Marine Insurance

Defense contractors regularly move specialized, high-value equipment from facility to facility and across international borders. Inland marine insurance covers equipment and materials while they're in transit over land or temporarily stored at a location not listed on your commercial property policy. Ocean marine insurance extends that protection to cargo shipped by sea. Together, they make sure your equipment isn't uninsured during the legs of its journey that your property policy doesn't reach.

Pairs well with

Directors and Officers Liability

Defense contracts come with governance obligations. D&O insurance covers your executives and board members personally when a claim alleges a wrongful act in managing the company, including compliance failures on federal contracts.

Commercial Property Insurance

Even if your team works globally, your headquarters building and the equipment inside it need coverage against fire, theft, and other physical losses. Commercial property insurance is the foundation for protecting your fixed assets.

Workers' Compensation

For domestic employees, state workers' compensation laws apply. Idaho requires most employers to carry it, and Texas has its own rules for government contractors. DBA handles the overseas piece; domestic workers' comp handles the rest.

Commercial General Liability

General liability covers third-party bodily injury and property damage claims that arise from your operations, products, or premises. It's typically required by government contract and pairs with E&O to close the gap between professional and operational exposures.

Commercial Umbrella Insurance

Government contracts often require higher liability limits than a standard policy provides. A commercial umbrella policy sits above your underlying policies and extends their limits when a large claim exhausts the primary coverage.

What this coverage protects against

Common risks and how this coverage addresses them. Tap any scenario to expand.

  • A manufactured part is blamed for an equipment failure overseas.

    The risk

    Your company supplies precision components for a defense system. After a reported malfunction during an operation, investigators trace part of the failure to your manufacturing process. The government contractor above you in the supply chain files a claim seeking reimbursement for damages and project delays.

    How this coverage helps

    Your errors and omissions liability coverage pays for your legal defense and, up to your policy limits, the covered damages awarded. Without it, you'd be funding that defense out of operating capital while your contracts stay frozen.

  • A foreign adversary targets your network to access government data.

    The risk

    Your team works on a contract that requires access to a secure government portal. A sophisticated phishing campaign gives attackers a foothold in your network, and forensics later confirm that contractor credentials were used to probe adjacent systems. Your government client issues a cure notice and demands an incident report within 72 hours.

    How this coverage helps

    Cyber liability coverage activates immediately. It funds forensic investigation, covers the cost of your incident response team, and helps pay for the regulatory and contractual notification obligations your contract requires. Business interruption coverage offsets revenue lost while you lock down and remediate.

  • An employee is seriously injured while supporting a contract in a conflict zone.

    The risk

    One of your technicians is stationed abroad to maintain equipment under a U.S. Army contract. During a routine site visit, he is caught in an incident that results in serious injuries requiring medical evacuation and months of rehabilitation. His medical costs and lost wages pile up quickly.

    How this coverage helps

    Because you carry Defense Base Act coverage, the policy covers his medical treatment, rehabilitation, and disability wages as required under federal law. You stay in compliance with your contract and avoid the fines and potential criminal liability that come with going bare on DBA.

  • A contractor's family member is taken hostage to pressure the company.

    The risk

    Your project manager is posted in a region with elevated kidnapping risk. A criminal group takes a family member as leverage and demands a ransom payment, along with threats of further action if law enforcement is contacted. Your company has no protocol for this situation and no reserved funds for a response.

    How this coverage helps

    Your kidnap, ransom, and extortion policy connects you to a crisis management firm immediately. The policy covers negotiation expenses and, subject to policy terms, the ransom itself. Some KRE policies also include pre-incident consulting that helps you build response protocols before you deploy personnel to high-risk locations.

  • High-value equipment is stolen during ground transport between facilities.

    The risk

    A shipment of specialized sensor arrays is being transported by truck from your manufacturing facility to a government test site. The cargo truck is targeted during an overnight stop, and the equipment is stolen. Your commercial property policy only covers property at listed premises.

    How this coverage helps

    Inland marine coverage fills the gap. It covers high-value equipment in transit, including during stops along the route. Your loss is paid and your delivery obligation to the government client doesn't have to wait on a drawn-out coverage dispute.

  • A government auditor finds a compliance gap and your executives face personal liability.

    The risk

    A routine audit of your federal contract uncovers a documentation gap that the contracting officer characterizes as a material misrepresentation. In addition to the contract dispute, a shareholder files a derivative suit alleging your leadership team failed to maintain adequate compliance controls.

    How this coverage helps

    Directors and officers liability insurance covers the personal defense costs for your executives named in the suit and, subject to policy terms, any settlement or judgment. D&O keeps a contract-level compliance dispute from turning into a personal financial crisis for your leadership team.

  • A ransomware attack stalls deliverables on an active government project.

    The risk

    Ransomware encrypts your internal project management systems and engineering files three weeks before a contract milestone. You can't access design documentation or submit required deliverables. The contracting agency sends a notice of potential default, and the clock is running.

    How this coverage helps

    Cyber liability insurance covers your incident response and system restoration costs. Business interruption coverage under the policy reimburses lost revenue during the outage. Having documented coverage in place also gives your contracting officer context that you're responding in good faith and with professional support.

Frequently asked questions

Do I need special insurance if I'm just a subcontractor on a government prime contract?
Yes. Most prime contractors flow down insurance requirements to their subs, and those requirements often include minimum limits for general liability, E&O, and cyber coverage. Your subcontract language will spell out what's required, but Bittick can review those requirements with you and make sure your policies actually satisfy them before you sign.
How does Defense Base Act insurance differ from regular workers' compensation?
Standard workers' compensation only covers employees working within the state where the policy is written. DBA is a separate federal program that covers employees working outside the United States on U.S. government contracts, including civilian contractors supporting military operations. If your people are deployed internationally under a government contract, DBA is legally required, and the penalties for non-compliance are serious.
What does cyber liability insurance actually cover for a defense contractor?
A cyber policy for a defense contractor typically covers breach investigation costs, regulatory notification obligations, third-party claims from clients or partners whose data was compromised, and business interruption losses while systems are restored. Given that defense contractors are high-value targets for state-sponsored hackers, carriers who write this class of business often include access to specialized incident response resources. Coverage terms vary significantly by carrier, so this is worth a detailed conversation.
Is kidnap and ransom insurance only for companies with overseas employees?
Overseas operations are the most common reason defense contractors buy KRE coverage, but it's not the only scenario. Domestic extortion attempts, including cyber extortion targeting sensitive government data, can also fall within the scope of a KRE policy depending on how it's written. Your Bittick advisor can walk through the policy language with you to clarify exactly what scenarios your contract of coverage addresses.
How much does defense contractor insurance cost?
There's no standard rate for this class of business. Premiums depend on your revenue, the nature of your contracts, where your employees work, how much sensitive data you handle, and which coverage lines you need. A small domestic subcontractor with no overseas exposure will pay significantly less than a prime contractor managing personnel in multiple high-risk regions. Bittick shops your risk across multiple carriers who actively write this market, which means you get competitive pricing alongside real coverage depth.
Can Bittick place this coverage if my company is based outside Idaho or Texas?
Yes. Bittick is licensed in California, Colorado, Idaho, Nevada, Oregon, Texas, Virginia, and Washington. Our Eagle, Idaho office is our primary hub, and we also serve the San Antonio metro through our Texas office. If your company is in any of our licensed states, we can work with you directly. Reach out and we'll confirm whether we can serve your location.

Talk to Bittick About Your Defense Contractor Coverage

Tell us about your contracts and your team, and we'll put together a coverage program that matches your actual risk profile.

Don't like forms? Contact us at 208-609-3511 or email us.